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Data from the Pew Research Centre suggest America's middle class is glum

MOST people like to describe themselves as middle class, which makes it a bit of a useless category. But the Pew Research Centre's most recent polling suggests that the proportion of Americans that place themselves in it has shrunk since 2008. This seems not to be because more people have suddenly decided that they are upper class. Instead it reflects the effects of a bad decade for America's middle men and women. The share of total household income going to all middle-income Americans (defined as those who earn between two-thirds and double the median) has been overtaken by those in the upper income group. This is not a case of a rising median pushing people out of the middle-income category, as the median wage actually declined between 2000 and 2010. There are two ways to interpret this. The first is that America's middle will bounce back when the economy eventually recovers from the aftershocks of the financial crisis. The second, gloomier, thesis is that more of the same can be expected as America's economy continues its decline relative to China's.

Our middle class is expected to cost compete with China, while our
militay industrial complex is not. We spend apx 20x more per capita
on defense. Where are the conservatives on this wasteful spending?
Using a carrier launched Mach 2 jet fighter with laser guided weapons, on a Taliban riding his mule or dirt bike through the Kyber Pass, doesn't sound cost effective. Don't count on a middle class spending boom anytime soon, if we continue the bottomless war.

That is not what the article is showing. They are showing that the share of total national INCOME is rising for the upper class, and that the share of the total national INCOME is falling for the middle class.

You can blame this all on Jack Welsh and his "shareholder value". The theory goes that if companies maximize their profits, their share price will go up and benefit all shareholders. Since many people hold shares in their 401k, many will benefit. However, many people only own a small number of shares. A few large shareholders benefit disproportionately from any increase in share price, that's why they get much richer. Since most of the CEOs and top management are large shareholders, they beneift a whole lot more than a low to mid level employee, so their objective is to increase profit, by lowering cost, i.e. large scale outsourcing and offshoring, importing cheap foreign labor etc. Since the majority of middle class wealth comes from employment rather than shareholding, it only follows that middle class wealth dwindles with the loss of jobs and stagnant wages.

To understand the flaw of the shareholder wealth concept, just look at the investment banks and law firms. Most are in it to make their employees as wealthy as possible, not to make the shareholders wealthy. Which is why firms like Goldman Sachs are usually terrible investments for shareholders, and why their employees do well. For the sake of our future, we need to rethink this whole shareholder wealth concept. It's time for firms to think more like investment banks and law firms, look out for their employees rather than the elusive shareholders.

These kind of pessimistic outlooks have happened in the past.
In the late 1970s, Japan was set to surpass the U.S. It did not happen.

Everyone touted China as a country of 1.3 billion "Consumers" who
was sure set to overtake the U.S. The verdict is still out on that one,
and if you are bullish on China, go ahead and buy as many Condos
in Ordo, Inner Mongolia, China. hahaha....

What makes me laugh the most about predictions of U.S. demise is
countries like Brazil "rising." A country where 51% of the population
is Black(of various shades), but there isn't a single African Brazilian
CEO and CIO in the private sector. How can a country rise if the middle
class is just a clever marketing shuffle?

As for the U.S., there is still lots of resources, untapped potential, and
unexplored areas to accomodate a population that one day will be
over 1 billion people (provided there are no global wars, etc.).

USA Today published data on a squeezed middle class which still
makes over 90 thousand dollars a year. Down from over 120 and some
change. 90 thousand dollars is more than the so called emerging nations,
and it would take them decades (if not a century to even be within that
range). The pain Americans feel is real, but it is a bit overblown by the media.
The biggest threat America faces is to give up its Can Do Spirit, and to become
a larger version of Greece (where there are more government workers than
a private sector). To anyone here that may feel down, take a Sabattical to
recharge your batteries, and focus on something entirely new. I hope you
will come up with a great idea that will start an industry and create lots of
jobs. If Don Laughlin could start a city where there was none, and Steve Jobs
started America's most valuable company in his family garage, it should tell
you that you are in the right country. Leave the pessimism to other nations
and their quirks. This is America. Land of the free; Home of the brave.

Im not sure I would call it de-Americanization, but it defenitly is de-middleclassification.

The rich in the US are hard to compete with (with there strong influence over the US government) in a global economy. The rich are able to use labor from around the world in order to push costs down and aggregate more of the wealth compared to a middle class that is stuck grinding away in jobs that are becoming obsolete (computers and robots!)

Before globalization, rich people and firms were stuck paying Americans higher wages for jobs that could not be done somewhere else because of instability and the high cost of the transportation of goods and information. Now, because of the "stable global order" (yes, it actually is quite stable), firms feel comfortable having their firms production capabilities located wherever they are cheapest, resulting in a worse off US middle class and better off US upper class.

My guess is that as the world becomes less unified, more fragmented and less stable, the US will be resurgant as firms relocate to a country where the military is big enough to enoforce property rights against foreign and domestic aggresors.

Sorry, we've been running a "lower the taxes on corporations and high income individuals and and all will be well" experiment since 1981 in the US and the very predictable results are in: surprise, surprise, the top end is making more and more money and the middle is not. So the solution is..more tax cuts for the high end!

Vanbrugh,
Do you mean those Republicans? That is the way I understand.

Republicans are for big government, for big deficit, for unnecessary wars, for tax cuts for the rich, for squeezing the middle class, for cutting funds for education & public health, not to mention that they are also against renewable sources of energy.

The shrinking middle class in the United States is a direct result of the dissolution of Labor unions, loss of worker's rights and the wage disparity between upper and middle classes. Also, the price of goods and services plays a large role. What seems to escape the attention of major corporations, the more the middle to lower income makes in wages, the more they would spend in goods and services, thus increasing profits for the corporations. Corporations and billionaires are like greedy, little children who don't wish to share their toys, they want it all for themselves.

I disagree. The US economy in 1970 was about $9 billion in 2012 dollars, while today it is $15.6 billion. It has grown over 70%, while the population has grown by about 50%.

So overall, the last 4 decades HAVE been good for the US economy, some of which is due to globalization. Globalization has allowed America to apply its workforce to the industries they are most productive in and leave the ones it isn't to others. This is a key reason that American productivity is the highest in the world, as well as why it has such a dynamic and robust economy.

Now there's a strong argument to be made that the US is a more unequal place as a result of globalization. See http://mrzine.monthlyreview.org/2010/wolff070210.html, America is more unequal since it has been since the 1930s. But I don't think that's necessarily caused by globalization, at least not completely - consider that during the last plateau in the 30s, protectionism was all the rage. I think you're also forgetting that the US is the biggest exporter in the world. In fact when you subtract exports from imports, the US's net trade balance is less than 3% of GDP (see http://www.wolframalpha.com/input/?i=%28usa+imports-usa+exports%29%2Fusa...). It's simply not as important as many people think, overall.

And for a moment, lets think big picture humanity stuff. I believe free global trade benefits the US. But I also think it benefits its trading partners, like Korea and yes China. It's a win-win in that all the economies get to play to their strengths and take advantage of the strengths of others. I also think this trade encourages and cements global cooperation and peace. As a result, I think that globalization (and especially America's participation in it) has led to a more prosperous, safer, more hopeful world.

”Throughout recorded time, and probably since the end of the Neolithic Age, there have been three kinds of people in the world, the High, the Middle, and the Low. They have been subdivided in many ways, they have borne countless different names, and their relative numbers, as well as their attitude towards one another, have varied from age to age: but the essential structure of society has never altered. Even after enormous upheavals and seemingly irrevocable changes, the same pattern has always reasserted itself, just as a gyroscope will always return to equilibrium, however far it is pushed one way or the other. The aims of these three groups are entirely irreconcilable. The aim of the High is to remain where they are. The aim of the Middle is to change places with the High. The aim of the Low, when they have an aim -- for it is an abiding characteristic of the Low that they are too much crushed by drudgery to be more than intermittently conscious of anything outside their daily lives -- is to abolish all distinctions and create a society in which all men shall be equal.”
George Orwell – “1984”
The Middle in the United States is currently politically represented by the Democrat Party, and that country is currently in an electoral year.

Why did we let the outsourcing stampede continue unimpeded for several years? We're not share/stakeholders and never were. Why did transfer factories wholesale to China and IT jobs to India? The quick answer is we had no control over it. All of this was being done for the benefit of the 1%, the privileged class. How to reverse it? Again, the quick answer is "socialism" - nationalize the too-big-to-fail banks, corporations & other multinationals so they (or rather "we") can't outsource our jobs in the pursuit of more profits. CEOs don't need to be making 500+ times what a factory worker makes. That is just plainly ridiculous.

"It also looks like the middle class is shrinking because they're getting richer and moving into the upper class. Why is this bad?"

It would be nice if this were true. I don't think you are reading this chart correctly. The median net worth of all three groups has shrunk since 2007, but you will note that the median net worth of the middle group has shrunk by nearly half. That is the news. The middle is getting poorer. The rich got a little poorer too, due to the recession - this must be why they have their knickers in such a twist.

The poor just stay poor. I wish someone since Orwell would notice that they are so busy staying alive that they have no energy for much initiative to correct their situation. And if they can't afford a car, they have no driver's license and will have trouble voting. Which is all part of the Grand Old Plan...

Globalization has not been kind to the United States since 1970. Globalization has unleashed a wave of lower-cost competitor countries -- like South Korea and China -- that are gradually chipping away at America's economic leadership. All those oh-so-trendy American business schools that first urged globalization in the second half of the 20th century have a lot of awkward questions to answer. Globalization has become de-Americanization.

What you seem to be missing is that the income of the middle class is going down, not the number of people. So what the graphs are saying is that money and wealth are migrating upward but not the people in the middle class who it used to belong to.